The February Saudi Aramco Contract Price for LPG soared to a record high of $1028 per tonne yesterday. This represents an increase of $142 per tonne from the price of January 2012. Local LPG Producer prices that are indexed to the Saudi Aramco CP and calculated on a 40:60 ratio of propane to butane are expected to increase by at least Rs15,000 per tonne to settle at Rs107,000 per tonne with effect from 3rd February 2012. The resultant increase in prices will translate into an increase of Rs177 for domestic and Rs681 for commercial cylinder. LPG retail prices could jump as high as Rs155-160 per kilo whereas the sale price for domestic and commercial cylinders will increase from Rs1650 to Rs1830 and Rs6356 to Rs7035 respectively.
“We urge the government to seriously reconsider the imposition of the petroleum levy on local LPG, which could further escalate prices and increase them by Rs28,000 per tonne instead of Rs 15,000” said Belal Jabbar, the spokesman for the LPG Association of Pakistan. On 16th January 2011 the federal government imposed a petroleum levy of Rs11,486 per tonne on LPG production in order to increase its price and equate it with that of imports.
However, in order to avoid criticism and public backlash state owned LPG producers upon direction from the Ministry reduced their prices by Rs10,000 per tonne before adding the levy of Rs11,486. The resultant increase in prices was therefore Rs1486 per tonne. However public sector producers suffered a heavy loss on account of reducing their prices and will most likely not absorb the impact of the petroleum levy in February. The ultimate impact of the levy will be borne by the consumer. “LPG imports have plunged since the imposition of the levy as local prices have arisen to alarming levels said Belal. Imports for December 2011 stood at 17000 tonnes whereas those in January have been less than 12,000”. Almost 70 per cent of the Local production is controlled by the government of Pakistan through its holdings in PPL, OGDCL, PARCO and PPL. Furthermore 80 per cent of the country’s requirement is met through local production. “The imposition of the levy is unjustifiable and is pure discrimination against local production” said Belal.
